Rising Tide of Operational Risk Demands Due Diligence in Vendor Selection

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Widely publicized settlements in government enforcement actions demonstrate the liabilities that can arise from outsourcing by the mortgage banking and mortgage servicing industries. In this regulatory environment, servicers cannot be cavalier about their choice of vendors, or select them with a check-the-box approach to due diligence. Instead, banks and mortgage servicers must ensure that their vendors perform critical mortgage servicing functions in a manner consistent with their legal and regulatory obligations and service level standards. Much guidance on vendor selection focuses on intangible principles associated with risk reduction, with much less practical guidance available on “best practices” for identifying and selecting vendors. This article attempts to fill that gap, and focuses on practical criteria relevant to conducting appropriate due diligence on potential vendors.

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Published In: Finance & Banking Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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